The surprising truth about what's really in Canadians' wallets

Those who want to know how they financially stack up against others should check out MoneySense magazine's All-Canadian Wealth Test.

Despite a growing chorus of voices that say the recession is over, many Canadians are feeling downright poor these days. But MoneySense magazine's All-Canadian Wealth Test reveals that many of us are actually a lot better off than we think.

Available on newsstands across the country starting today, the Wealth Test lets Canadians determine how they stack up against other Canadians on all the key indicators of household prosperity. MoneySense research reveals whether we're earning more or less than our peers, if we're wealthier or poorer than others, and if our track record in the stock market is better or worse than most investors. Canadians can also visit MoneySense.ca where they can calculate their own net worth and compare it to people like themselves.

The good and bad news on how we stack up:

• The good news - yes, good news - is that the average household is better off today than it was nine years ago at the peak of the dot-com boom. In fact, we're 7 per cent richer in real terms in grim 2009 than we were in bubbly 2000.
  
• But there are warning signs. While the rich are getting richer, it's not clear that middle- and working-class Canadians are any wealthier.
  
• Another problem? The way we're getting rich. Rather than make moneyon the stock market or accumulate savings in the bank, a significant portion of our wealth is tied up in the rising value of our homes. Real estate now makes up an unprecedented share of our personal balance sheets. That may be fine now. But if house prices crash, look out below.
  

The All-Canadian Wealth Test also reveals that:

• The average unattached Canadian has an annual income of $37,800. The average family earns $91,500.
• The path to higher income starts with being a guy. Women make, on average, about two-thirds of what men do.
• The richest 20 per cent of Canadian households control about 69 per cent of the wealth in Canada. Meanwhile, the poorest 20 per cent controls no wealth at all. It's actually in debt.

Source: MoneySense

59% of Canadians live payday to payday

Nearly 60 per cent of Canadians would have trouble paying the bills if their paycheque were delayed by one week, a nationwide survey suggests.

The Canadian Payroll Association survey released Monday found that not only were 59 per cent of respondents living paycheque to paycheque, but they had little ability to put money away for their retirement.

"We were shocked by that number," CPA chairman Janice MacLellan said. "So many Canadians are now living so close to the line that if they miss a single paycheque, the majority will find themselves in financial difficulty."

Financial experts recommend that people should have emergency funds to cover about three months of expenses, such as rent, mortgage, utilities, other bill payments and groceries.

Of those surveyed, the younger workforce said they felt the greatest pinch. Forty-five per cent of people aged 18 to 34 said it would be difficult or very difficult to make ends meet if a paycheque were delayed, with a further 21 per cent saying it would be somewhat difficult.

Single parents were in the most precarious situation, with 72 per cent saying they would have some trouble making ends meet.

The survey also found that 50 per cent of workers couldn't save more than five per cent of their net pay for retirement — half the amount financial experts generally recommend.

About one-third of respondents said they've been trying to save more money than a year ago because of the economic uncertainty, but have been unable to do so. Another 42 per cent said they weren't trying to save more.

When it comes to remuneration, 65 per cent of employees said higher wages were most important to them, while 25 per cent cited better health benefits and 10 per cent preferred education funding.

Asked what they would do with a $1 million lottery win, 70 per cent of people said their top priority would be to pay off debt, while 35 per cent would put as much as possible toward retirement.

Surprisingly, not many people would have a celebration. Just three per cent of Canadians said they would use some of their winnings to throw a party, with Quebecers — at seven per cent — a bit more likely to do so.

And if you're a relative of a lottery winner, don't count too heavily on getting a share. Just 26 per cent of Canadians said they would give some of their winnings to family members.

The CPA survey involved more than 2,800 employees across Canada. The results are considered to have a margin of error of 2.3 per cent, 19 times out of 20.

Source: CBC News

Canada Auto Sales for July 2009

Here is the new auto sales statistics in Canada for July, 2009.

Acura: +7% to 1,644
Audi: +40% to 822
BMW: +12.1% to 2,398
Chrysler: -10.4% to 15,958
Ford: +47.4% to 26,788
General Motors: -41.9% to 19,663
Honda: -22% to 11,340
Hyundai: +37.8% to 10,488
Infiniti: -1.5% to 702
Jaguar: -3.2% to 90
Kia: +29.6% to 5,110
Land Rover: -24.6% to 129
Lexus: +13.9% to 1,512
Mazda: -18.5% to 6,491
Mercedes-Benz: +9.5% to 1,978
Mini: -11.8% to 442
Mitsubishi: +18.7% to 1,901
Nissan: -3.2% to 6,832
Porsche: +37% to 200
Saab: -85.8% to 38
smart: -42% to 290
Subaru: -3.2% to 1,763
Suzuki: -8.7% to 1,158
Toyota: -14.2% to 17,720
Volkswagen: +14.6% to 4,018
Volvo: +39.4% to 591

Canada Auto Sales for March 2009

Acura: -42% to 1,211
Audi: +25.4% to 979
BMW: +8% to 1,711
Chrysler: -26.6% to 15,846
Ford: -15.1% to 17,021
General Motors: -17.6% to 24,695
Honda: -20% to 11,359
Hyundai: +25.5% to 8,818
Infiniti: -29.8% to 581
Jaguar: -57.8% to 57
Kia: +12.6% to 3,555
Land Rover: -26.9% to 171
Lexus: +21% to 1,363
Mazda: -22% to 7,060
Mercedes-Benz: +26% to 2,181
Mini: +3.7% to 307
Mitsubishi: +8.9% to 1,983
Nissan: -6.5% to 7,024
Porsche: +9.6% to 172
Saab: +117.7% to 172
smart: -34.6%% to 212
Subaru: +14.6% to 1,878
Suzuki: -14.4% to 948
Toyota: -25.5% to 14,538
Volkswagen: -10.6% to 3,156
Volvo: +5.6% to 491

The sales numbers are compared with last year's numbers.

Comments on Geithner’s Rescue Plan Outline

The Treasury provided only the most general descriptions of how struggling homeowners and small businesses would be helped on Tuesday. And officials said they have yet to design a program that is a core part of the plan which is based on three parts:

1) Give $50 billion to homeowners struggling with foreclosure. Details on this will come later but it is, in my opinion, a necessary element.
2) Institute a “stress test” to determine which of the remaining banks are insolvent. If they are found to be insolvent, then…
3) Establish a public-private entity to swallow up the bad assets and sell them later

The heart of the problem is this: how do you price those toxic assets?

Geithner seems to be calling in the vulture investors to buy up this junk as they have done before. But the vultures are unwilling to do so at this point because the banks won’t sell the bad assets at their true bargain-basement value.

It isn’t buyers who cannot be found. It’s sellers: the banks don’t want to sell at market prices because then they would have to take a massive loss on their books and be revealed as utterly insolvent.

As Nobel economist Joseph Stiglitz argues: the banks are already insolvent and just don’t want to admit it. If the housing market dropped one percent more, those 18-28 billion would fall to zero and the gig would be up officially.

I don't get why Secretary Geithner continue to insist that a public private partnership can somehow coax the big banks to sell their toxic assets at a price that won’t rob taxpayers?

10 Most Important Economic Indicators

10 most important economic indicators that every investor should pay attention to for the big piture is listed in reverse order, and this post also explains how each of them has an impact on the stock market. As investors, we should all know about CPI, PPI, ECI, and GDP.

10. Durable Goods Orders
This is a government index that measures the dollar volume of orders, shipments, and unfilled orders of durable goods. Durable goods are new or used items generally with a normal life expectancy of three years or more.

This report gives us information on the strength of demand for US manufactured durable goods, from both domestic and foreign sources. When the index is decreasing (fell by -1% in December, 2008), it suggests demand is weakening, which will probably result in decresing production and employment.

9. Personal Income and Consumption
Also known as Personal Income and Outlays. Personal Income represents the income that households receive from all sources, including employment, self employment, investments, and transfer payments.

Income is the major determinant of spending (US consumers spend approximately 95 cents of each new dollar) and consumer spending accounts for two-thirds of economy. Greater spending spurs corporate profits and benefits. If more spending will help the economy recover, the US consumers have less than 5 cents of each new dollar more to help the economy to recover. Not too much room ahead compared to China and Japan which has 30% saving rate!

8. Employment Cost Index (ECI)
The ECI is designed to measure the change in the cost of labor, including wages and salaries as well as benefits.

It is useful in evaluating wage trends and the risk of wage inflation/deflation. If wage deflation threatens, it's likely that interest rate will go down, then bond and stock prices will rise. With Fed's rate at 0 - 0.25%, how much room do you think the Fed still has to help the stock market?

7. Producer Price Index (PPI)
The PPI measures the average price of a fixed basket of capital and consumer goods at the wholesale level. There are three primary publication structures for the PPI: industry, commodity, and stage-of-processing.

It's important to monitor the PPI excluding food and energy prices for its monthly stability. This is referred as the core PPI and gives a clearer picture of the underlying inflation trend. Inflationary Pressure is generated when the core PPI posts larger-than-expected gains. It's considered a precursor of consumer price inflation.

6. Consumer Price Index (CPI)
The CPI measures the change in price of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, entertainment and education. It's also known as the cost-of-living index.

The rate of change of the core CPI (CPI excluding food and energy prices) is one of the key measures of inflation/deflation for the economy. Same as PPI, deflationary pressure is generated when the core CPI posts larger-than-expected losses. Deflationary pressure is not generally good thing for the stock market.

5. Consumer Confidence Index
A survey of 5000 consumers about their attitudes concerning the present situation and expectations regarding economic conditions conducted.

This report can be helpful in predicting sudden shifts in consumption patterns. Since consumer spending accounts for two-thirds of the economy, it gives us insights about the direction of the economy. However, only index changes of at least five points should be considered significant. According to the latest Consumer Confidence Index report, it's near a record low.

4. Existing Home Sales
In normal circumstances, this indicator will not make it to the 4th spot, but due to the housing market crash caused this economy crisis, I think it's more important to take a closer look at this indicator.

This report measures the selling rate of pre-owned houses. It's considered a more important indicator of activity in the housing sector than the new home sales, as it accounts for around 84% of all houses sold and is released earlier in the month.

This provides a gauge of not only the demand for housing, but the economy momentum. People have to be financially confident in order to buy a house.

3. Retail Sales
This index measures the total sales of goods by all retail establishments in the US. These figures are in current dollar, that is, they are not adjusted for inflation. However, the data are adjusted for seasonal, holiday and trading-day differences between the months of the year.

This is the most timely indicator of broad consumer spending patterns. It gives you a sense of the trends among different types of retailers. These trends can help you spot specific investment opportunities.

2. Beige Book
Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from bank and branch directors and interviews with key businessmen, economists, market experts, and other sources. It summarizes this information by District and sector.

The Fed uses this report, along with other indicators, to determine interest rate policy at FOMC meetings. If the Beige Book portrays deflationary pressure, the Fed may decrease interest rates. But, where can the interest rates go anymore?


1. Gross Domestic Products (GDP)
GDP measures the dollar value of all goods and services produced within the borders of the United States, regardless of who owns the assets or the nationality of the labor used in producing that output. Investor should monitor the real growth rates because they are adjusted to inflation.

This is the most comprehensive measure of the performance of the economy. Healthy GDP growth for US is between 2.0% - 2.5% when the unemployment rate is between 5.5% - 6.0%. As the unemployment rate might reach 12% by end of the year as indicated by some economists, GDP growth will take a while to get to the positive territory.

Summary:
Almost all the economic inidicators currently reflect deflationary pressure, which means a decrease of interest rates becomes imminent. However, with the Fed's rate at 0 - 0.25%, Where is the room to cut the rate anymore? Where is the non-convensional method to help the economy right now? I just don't see it coming anytime soon.

Stocks rally & Oil falls on Fed's rate cut

The S&P 500 Index was up 44.6 points, or 5.1% today with the Fed's rate cut. It closed above its own 50-day moving average which shows really bullish signal while 10-dma and 20-dma are on the rise to cross the 50-dma. It's also off the over-bought territory to show further upside technically.

Crude oil, on the other hand, tumbled today as the U.S. Federal Reserve interest rate cut revived investors' concern about slumping demand during the economic recession.

Some analysts are calling for the next bull market, but the others still remain bearish. Personally, I am more bearish on the current market condition.

U.S. Economy Week Ahead

Goldman and Morgan Stanley are expected to post another big quarterly write-downs on Tuesday and Wednesday respectively after their recent conversion into bank-holding companies. The Wall Street Journal expects "More Pain at Goldman and Morgan Stanly".

The Fed is expected to lower their target for the overnight federal funds rate by at least a half-point to a record low of 0.5% at the end of a two-day meeting, on Tuesday. If everything goes as expected, the Fed needs to find out some other ways to boost the sluggish economy.

The Organization of Petroleum Exporting Countries (OPEC) is likely to cut oil production to stem recent price declines. OPEC May Cut Production By 1.5 Million Barrels A Day. The meeting is on Wednesday in Algeria. Let's watch closely at the movement of the oil price for the week ahead.

More data on inflation and the housing market will be released next week, with the November Consumer Price Index on Tuesday, the National Association of Home Builders' December Housing Market Index on Monday and a government report on November housing starts Tuesday.

Job Report & Stock Market

In US, the unemployment rate reached its highest point since 1993, and overall employment fell by more than a half million jobs. Quite simply, there was nothing good in this report. As the stock market is typically leading the general economy for 6 months ahead, the worst is yet to come.

However, we need to remember that the fundamentals will still be horrible and appearing to get worse when the market starts up. Just as at the high in October 2007 the fundamentals looked good ahead according to Bernanke at least. So, the number will remain negative at the bottom, but the trend will tick upward.

In Canada, 70600 jobs lost last month, the worst single-month drop since 1982, and unemployment rate hits 6.3%. Ontario shed 66000 workers, and two-thirds of them are in factory jobs.